MANILA, June 8 (AFP): The Philippine economy faces a "perfect economic storm" of inflation at nine-year highs as food and oil prices soar, rising interest rates and slowing growth, analysts said.
They said inflation was unlikely to ebb soon after hitting an annual rate of 9.6 per cent in May, leading the central bank to hike borrowing costs last Thursday for the first time since 2005.
"Throw in rising unemployment and you have the recipe for a perfect economic storm," former budget secretary Ben Diokno told newmen.
Official data showed food prices rose 14 per cent in May as rice, the national staple, rocketed 31.7 per cent and corn 27.1 per cent. Petrol, kerosene and diesel prices have also surged.
"If inflation pressures persist into next year and it feeds into further price increases, or leads to an economic slowdown and job losses, then we may start to see unrest," warned political risk consultant Roberto Herrera-Lim.
"It is when you combine the two-job losses and inflation - then things become troublesome," Herrera-Lim, the Southeast Asian analyst for New York-based firm Eurasia Group, said in an interview published on the ABS-CBN television web site.
The government has already announced measures to ease the pain on the country's poor, such as a one-off 500-peso (11-dollar) subsidy to help pay electricity bills, which will cost
around 45 million dollars.
It has also announced a 68-million-dollar quarterly fuel subsidy for the public transport sector and loans to help convert buses and taxis to alternative fuels.
Meanwhile, farmers are to be given fertiliser subsidies and poor students scholarships, with the government going to the international debt market to raise 750 million dollars to help pay for it all.
But at the same time economic growth is slowing, falling to an annual rate of 5.2 per cent for the first quarter compared with 7.2 per cent for all of 2007.
Last year's economic performance was the best in 31 years and inflation in 2007 was just 2.8 per cent.
The government has now abandoned hopes of balancing the Philippine budget this year for what would have been the first time in a decade.
"Giving away cash grants for food and electricity consumption, subsidies for farmers and the transport sector and borrowing from abroad to pay for them show desperation," said Diokno. "It doesn't help the situation in the long run."
